Correlation Between Defensive Market and Federated Municipal
Can any of the company-specific risk be diversified away by investing in both Defensive Market and Federated Municipal at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Defensive Market and Federated Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defensive Market Strategies and Federated Municipal Ultrashort, you can compare the effects of market volatilities on Defensive Market and Federated Municipal and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Defensive Market with a short position of Federated Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defensive Market and Federated Municipal.
Diversification Opportunities for Defensive Market and Federated Municipal
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Defensive and Federated is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Defensive Market Strategies and Federated Municipal Ultrashort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Municipal and Defensive Market is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Defensive Market Strategies are associated (or correlated) with Federated Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Municipal has no effect on the direction of Defensive Market i.e., Defensive Market and Federated Municipal go up and down completely randomly.
Pair Corralation between Defensive Market and Federated Municipal
Assuming the 90 days horizon Defensive Market Strategies is expected to generate 11.66 times more return on investment than Federated Municipal. However, Defensive Market is 11.66 times more volatile than Federated Municipal Ultrashort. It trades about 0.23 of its potential returns per unit of risk. Federated Municipal Ultrashort is currently generating about 0.15 per unit of risk. If you would invest 1,051 in Defensive Market Strategies on April 7, 2025 and sell it today you would earn a total of 139.00 from holding Defensive Market Strategies or generate 13.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Defensive Market Strategies vs. Federated Municipal Ultrashort
Performance |
| Timeline |
| Defensive Market Str |
| Federated Municipal |
Defensive Market and Federated Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defensive Market and Federated Municipal
The main advantage of trading using opposite Defensive Market and Federated Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defensive Market position performs unexpectedly, Federated Municipal can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Federated Municipal will offset losses from the drop in Federated Municipal's long position.| Defensive Market vs. Morningstar Defensive Bond | Defensive Market vs. Artisan High Income | Defensive Market vs. Intermediate Term Bond Fund | Defensive Market vs. Fidelity Money Market |
| Federated Municipal vs. Tiaa Cref Inflation Linked Bond | Federated Municipal vs. Short Duration Inflation | Federated Municipal vs. Ab Bond Inflation | Federated Municipal vs. Ab Bond Inflation |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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